Of changing grocery store markets and food abundance or food deserts

Three decades ago, the Chicago area grocery market was very different:

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For years, Chicago was largely a two-grocery town: as recently as the late 1990s, Jewel and its No. 2 rival at the time, Dominick’s, controlled two-thirds of the local grocery market.

Times have changed:

But the grocery landscape in 2022 is vastly different. Dominick’s has been gone for nearly a decade, while Jewel and 21st-century rival Mariano’s face increased competition from major retailers such as Walmart, Costco and Amazon Fresh as well as specialty grocers, including Trader Joe’s and the Amazon-owned Whole Foods.

Jewel is still the most-commonly cited grocery-shopping destination for Chicago-area families, according to Nielsen data, but Aldi is nipping at its heels, having transformed itself from the stock-up store of the 1990s. Throw in a handful of online delivery startups that popped up during the pandemic and shoppers have more options than ever, squeezing Jewel from all sides.

Yet, newer grocery stores that once signaled hope are changing locations too:

The Whole Foods that opened in Englewood six years ago to live music, TV-ready politicians and out-the-door lines will close Sunday with little fanfare…

The city spent $10.7 million to subsidize the construction of the shopping center in which the store is located. When Whole Foods announced the 832 W. 63rd St. location’s closure in April, local activists said they felt betrayed, adding that the shuttering would limit access to fresh and healthy food in the neighborhood.

The company closed five other stores across the country “to position Whole Foods Market for long-term success” at the time, including a location near DePaul. It also opened an almost 66,000-square foot location in the Near North neighborhood the same week.

Few grocery options remain in the neighborhood. The handful of grocery stores remaining include a location for low-budget grocer Aldi close by and the smaller “Go Green Community Fresh Market” run by the nonprofit Inner-City Muslim Action Network. Another nearby Aldi in Auburn Gresham abruptly closed in June.

This highlights how much change can come to an essential market in a relatively short amount of time. New actors, new methods, new contexts.

The issue of food deserts was commonly discussed not too long ago but is not mentioned in this second article. However, these two articles highlight ongoing patterns even as the stores and brands change: some places have plenty of grocery stores (with Jewel and Mariano’s locations nearby) while others are not attractive to companies and residents have to search harder and further for food options.

Does this rapid pace of change suggest grocery stores will be quite different still in a few years? Can we imagine delivery only or virtual reality grocery shopping?

Why it can take months for rent prices to show up in official data

It will take time for current rent prices to contribute to measures of inflation:

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To solve this conundrum, the best place to start is to understand that rents are different from almost any other price. When the price of oil or grain goes up, everybody pays more for that good, at the same time. But when listed rents for available apartments rise, only new renters pay those prices. At any given time, the majority of tenants surveyed by the government are paying rent at a price locked in earlier.

So when listed rents rise or fall, those changes can take months before they’re reflected in the national data. How long, exactly? “My gut feeling is that it takes six to eight months to work through the system,” Michael Simonsen, the founder of the housing research firm Altos, told me. That means we can predict two things for the next six months: first, that official measures of rent inflation are going to keep setting 21st-century records for several more months, and second, that rent CPI is likely to peak sometime this winter or early next year.

This creates a strange but important challenge for monetary policy. The Federal Reserve is supposed to be responding to real-time data in order to determine whether to keep raising interest rates to rein in demand. But a big part of rising core inflation in the next few months will be rental inflation, which is probably past its peak. The more the Fed raises rates, the more it discourages residential construction—which not only reduces overall growth but also takes new homes off the market. In the long run, scaled-back construction means fewer houses—which means higher rents for everybody.

To sum up: This is all quite confusing! The annual inflation rate for new rental listings has almost certainly peaked. But the official CPI rent-inflation rate is almost certainly going to keep going up for another quarter or more. This means that, several months from now, if you turn on the news or go online, somebody somewhere will be yelling that rental inflation is out of control. But this exclamation might be equivalent to that of a 17th-century citizen going crazy about something that happened six months earlier—the news simply took that long to cross land and sea.

This sounds like a research methods problem: how to get more up-to-date data into the current measures? A few quick ideas:

  1. Survey rent listings to see what landlords are asking for.
  2. Survey new renters to better track more recent rent prices.
  3. Survey landlords as to the prices of the recent units they rented.

Given how much rides on important economic measures such as the inflation rate, more up-to-date data would be helpful.

Robot vacuum as mapper and research tool for homes

The Roomba may also be a cartography tool to map homes:

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The company announced a $1.7 billion deal on Friday for iRobot Corp., the maker of the Roomba vacuum cleaner. And yes, Amazon will make money from selling those gadgets. But the real value resides in those robots’ ability to map your house. As ever with Amazon, it’s all about the data

The Bedford, Mass.-based company’s most recent products include a technology it calls Smart Maps, though customers can opt out of sharing the data. Amazon said in a statement that protecting customer data is “incredibly important.”

Slightly more terrifying, the maps also represent a wealth of data for marketers. The size of your house is a pretty good proxy for your wealth. A floor covered in toys means you likely have kids. A household without much furniture is a household to which you can try to sell more furniture. This is all useful intel for a company such as Amazon which, you may have noticed, is in the business of selling stuff…

Amazon would not be alone in wanting to map your home. Apple Inc. also unveiled a tool in June for the next release of iOS, its mobile operating system, that uses the laser scanner on the latest iPhones to build 3-D models that it’s dubbed “RoomPlan”.

While I can imagine the commercial potential of this mapping (beyond retailers, this can be very useful for real estate businesses as well), I am also interested in the research potential. Such mapping could reveal how residents use space, floor plans, and people and pets moving through areas. Rather than relying on people’s reports on their interior activity or direct observations of this, the Roomba can be the research “eyes.” Equip it with a camera, microphone, and other sensors and it could collect all sorts of information (all agreed to by the research participants, of course). A vacuum and research device, all in one.

Tax breaks and suburban and Sunbelt growth

Wells Fargo is seeking a tax break to construct a regional office in suburban Irving, Texas:

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The Irving City Council will vote Thursday on millions of dollars in economic incentives to support the huge campus that’s expected to house 4,000 workers…

The agreement with Irving calls for Wells Fargo to “occupy at least 800,000 square feet of office space in the newly constructed buildings by December 2026. The proposed new office development would serve as a regional hub for Wells Fargo.”…

Irving proposes in its economic incentive agreement to give Wells Fargo up to $19 million in tax increment finance district funds to build a 4,000-space parking garage and “to reclaim a portion of the lake between the two adjacent parcels on the south side of Promenade Parkway.”

A separate economic incentive of up to $12 million would support construction of the Wells Fargo offices.

The project will increase the city’s tax “property value by a minimum of $200,000,000,” according to the City Council filings.

I can imagine the argument from Irving and similar communities about why the tax breaks are worth it:

  1. Such a move helps entice national and international brands to your community.
  2. Such a move brings jobs to the community.
  3. The tax breaks will be outweighed by the tax and physical improvements to the property in question.

All of this helps boost the status of the suburb and the economic prospects in the community.

On the other hand, tax breaks have downsides:

  1. Lots of communities offer tax breaks. The company may be less interested in this specific community and more interested in how much money they can get from a community.
  2. Less money will come into the community than if no tax breaks were offered.
  3. At some point, the tax breaks run out and then what happens to the company and the newly developed property?

As the title of this post asks, how much development in suburban areas like Irving involves tax breaks? Would Wells Fargo locate in Irving or in the region without tax breaks?

In the consternation over Caterpillar moving from Illinois to Texas, a reminder that the company moved from Peoria to a Chicago suburb in 2017

Caterpillar Inc. recently announced plans to move from Deerfield, Illinois to Texas. This prompted concerns about another big company (following the announced exit of Boeing’s headquarters) leaving the Chicago area and Illinois.

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While this fits one narrative of Chicago, the region, and Illinois losing residents and companies to places with growing populations and more conservative business climates, this is not the only move Caterpillar has made in recent years. The company started in 1910 in Peoria and stayed there for a long time before relocating to Deerfield in 2017. Here is how the Chicago Tribune described that move:

Caterpillar will take over the former headquarters of premium spirits maker Beam Suntory, which announced plans last year to move its 450 employees and global headquarters to Chicago’s Merchandise Mart, joining corporations including McDonald’s, Motorola Solutions, Kraft Heinz, Wilson Sporting Goods and Conagra Brands that have recently moved or made plans to relocate downtown. Beam Suntory’s move will be completed by the end of June.”

“Following a thorough site selection process, we chose this location because it is approximately a 20-minute drive to O’Hare airport and convenient to the city of Chicago via commuter train, achieving our goal to be more accessible to our global customers, dealers and employees,” Caterpillar CEO Jim Umpleby said in a news release Wednesday. “This site gives our employees many options to live in either an urban or suburban environment. We know we have to compete for the best talent to grow our company, and this location will appeal to our diverse, global team, today and in the future.”…

In 2011, Caterpillar’s then-CEO Doug Oberhelman talked of moving jobs out of Illinois because of the state’s tax and spending policies. But in 2015, the company said it would stay in Peoria and build a new corporate headquarters, reassuring employees worried about a move. That changed again in January, when the company said it was abandoning plans for the new downstate headquarters.

So is this a story about Chicagoland and Illinois losing important companies or a broader example of companies responding to global markets and leaving behind long roots? Caterpillar is a company started and based in a smaller Rust Belt city for decades and now will move to two of the biggest metropolitan areas in less than a decade. How long will it be in Irving, Texas before again seeking greener pastures and business advantages?

Inflation also affects infrastructure projects

Rising inflation in the United States is impacting large-scale infrastructure projects:

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The price of a foot of water pipe in Tucson, Arizona: up 19%. The cost of a ton of asphalt in a small Massachusetts town: up 37%. The estimate to build a new airport terminal in Des Moines, Iowa: 69% higher, with a several year delay.

Inflation is taking a toll on infrastructure projects across the U.S., driving up costs so much that state and local officials are postponing projects, scaling back others and reprioritizing their needs.

The price hikes already are diminishing the value of a $1 trillion infrastructure plan President Joe Biden signed into law just seven months ago. That law had included, among other things, a roughly 25% increase in regular highway program funding for states.

“Those dollars are essentially evaporating,” said Jim Tymon, executive director of the American Association of State Highway and Transportation Officials. “The cost of those projects is going up by 20%, by 30%, and just wiping out that increase from the federal government that they were so excited about earlier in the year.”

Because a number of these projects have to get done, it sounds like the primary effect of inflation is to delay projects. This has a cascading effect on getting better infrastructure in place, jobs, construction and its consequences, and more.

I wonder if there are any brewing stories where inflation plus cost overruns, which can happen on large complicated projects, lead to big price tags.

The billions in sales generated in a big suburban edge city

Joel Garreau defined an edge city as a suburban place with lots of office and retail space. Just how much retail activity takes place? A recent report found the edge city of Naperville, Illinois generated billions in sales in 2021:

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Naperville continues to reign as the top suburb in retail sales for the fifth year in a row, a recent report shows.

The city in 2021 recorded sales of $4.3 billion, $540 million more than No. 2 Schaumburg, according to the annual report from Chicago real estate and retail consultants Melaniphy & Associates…

For Naperville, 2021 restaurant and bar sales climbed to a record $443 million, up 34% from 2020′s pandemic plummet to $330 million after hitting $431 million in 2019…

By far the largest contributor to retail sales in Naperville is under the automobile dealership and gasoline category.

In 2021, Naperville figures rose by 33% over the previous year to $1.7 billion, which was the highest percentage increase throughout the Chicago metropolitan area, according to the report.

Some of the lead for Naperville could be tied to their large population and land area. Many suburban communities are not this big. For example, Schaumburg has roughly a little more than half the population of Naperville and about half of the land area.

But, I am more interested in the absolute figures. One suburb had over $4 billion in sales. This is a lot of money in one community. And hundreds of millions were spent in numerous categories, including restaurants, groceries, cars, and lumber, hardware, and building supplies.

Naperville has several areas that help generate these sales. In northeast Naperville, Ogden Avenue and Diehl Road (and adjacent areas) have retailers, restaurants, automobile related businesses, and more. Downtown Naperville is a vibrant food and retail scene. The Naperville area adjacent and near the Fox Valley Mall has a lot of activity. Business activity in southwest Naperville is a more recent addition.

In short, Naperville is not just a bedroom suburb with a high quality of life: it is full of retail activity even as it contains thousands of homes and dozens of subdivisions.

Oakland, do not give in to the A’s ask for tax payer money for a new stadium

As the 2022 baseball season is underway, so is the quest by owners to get public money to fund a new stadium. From Oakland, California:

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By 2020, the A’s were the only team left. But they made it clear they were prepared to leave, too. Last May, majority owner John Fisher and team president Dave Kaval—resident cartoon villains of what remains of the Oakland sports scene—began threatening to follow in the Raiders’ footsteps and relocate Oakland’s last pro team to Las Vegas … unless the Oakland City Council voted to help them build a $12 billion stadium “district”—replete with condos, hotels, and apartment buildings—on a wedge of waterfront property operated by the Port of Oakland just west of Jack London Square. If approved, the project would constitute one of the largest and most transformative development deals in California state history. It would likewise require hundreds of millions of dollars in public funding to complete. Fisher, who is heir to the Gap Inc. fortune and has a net worth north of $2 billion, has committed to privately finance the construction of the stadium itself, but the project isn’t viable without a suite of infrastructure improvements to the surrounding area. These improvements are what the A’s asked the city to find ways to pay for.

It was a familiar ploy. As journalists Neil deMause and Joanna Cagan write in Field of Schemes: How the Great Stadium Swindle Turns Public Money Into Private Profit, since roughly 1984, when the Colts left Baltimore for Indianapolis, team owners across the country have worked systematically to “supplement profits by extorting money from their hometowns,” usually “under threat of moving.” Starting around last summer, Fisher and Kaval began to expand upon their means of municipal extortion. In the run-up to a series of contentious City Council meetings, Kaval took to posting videos of himself on Twitter jubilantly attending Las Vegas Knights games, as if to spur the city into supporting his proposal out of jealous insecurity. Fisher, meanwhile, enlisted MLB commissioner Rob Manfred to act as muscle. “Thinking about this as a bluff is a mistake,” Manfred told the BWAA in July 2021. “This is the decision point for Oakland as to whether they want Major League Baseball going forward.”

Oakland has been struggling to make that decision ever since. Some, like Marcus Thompson, an East Oakland native, 2021 California Sportswriter of the Year, and author of Golden: The Miraculous Rise of Steph Curry,resent Fisher and Kaval’s tactics, and say that Oakland’s political leaders “should not be caving to an owner” worth over $2 billion who has “shown zero desire to be a meaningful member of our community unless it is profitable.” Certain Oakland political leaders, such as Councilmember Carroll Fife, who represents the district in West Oakland where the A’s stadium would be built, agree. “There are so many dire issues in Oakland right now,” Fife told me in February—citing, among other things, Oakland’s crises of gentrification, affordability, and homelessness, which the United Nations has singled out as “cruel.” Fife said she doesn’t believe “a sports team is going to address” any of them. “We should use public resources toward addressing residents’ immediate needs.”

Others believe the economic benefits of a new stadium are worth pursuing in and of themselves. “Building the new A’s ballpark would be a blessing,” Mitchell Schwarzer, historian, professor, and author of Hella Town: Oakland’s History of Development and Disruption, told me in an email. It would “bring crowds to adjacent Jack London Square,” and fill “its vacant spaces with places to eat, drink and shop.” Oakland’s mayor, Libby Schaaf, agrees, calling the A’s stadium project “a world-class waterfront ballpark district” with the potential to “benefit Bay Area residents for generations to come.”

No major city or leader wants to lose a major sports team. And the Oakland case is unique with multiple teams leaving in recent years.

However, the price that is often paid to keep a team is not worth it. The costs are too big, taxpayers lose other opportunities, the money would be spent elsewhere in the city if not at sporting events, and the owners are the ones who truly win with the increasing value of their team.

The Oakland case is also different because of the way the Athletics are run. The team has a Billy Beane approach that suggests an excellent team can be created with a limited payroll and an ability to exploit market inefficiencies. The A’s have done this a few times in the last two decades…and then they sell off all of their good players and start again. They just did this going into the 2022 season and have a minimal payroll of just under $50 million, second-lowest in baseball and roughly one-fifth of the biggest spenders in the sport. In addition to the economic case for taxpayers, is this a team worth supporting?

The Chicago region has a lot of human capital…and the workers have a stronger work ethic?

A recent article discusses the potential workers in the Chicago region and how hard they work:

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“Probably the strongest work ethic of laborers is the folks in the Midwest,” the Houston-based founder of SparrowHawk Real Estate Strategists said, definitely not rhyming. “They’re just, I don’t know what they put in the water there, but they’re hard workers. And so you’ve got a good labor force.”…

Illinois Manufacturing Association president and CEO Mark Denzler recalls a businesswoman who recently moved her small manufacturing operations of about 50-70 workers to Mississippi with the goal of saving on costs. She regrets the decision, he said…

“When I’m around the warehouse workers in the Midwest — Chicago and all these other Midwestern cities — they’re different than the folks in the southeast and the folks in the West Coast. They just have a different work ethic,” he said…

“It would be really hard. I’d be suspicious of anybody who said they can do it,” Bruno said. “But there is this strong experience with work in the Midwest that it’s part of your development. It’s connected to your health and well-being.”

Contrary to the final paragraph above, I bet this could be measured. But, what would it show? And how would workers in Boston or New York City or Atlanta or San Francisco respond to the argument that Chicago workers have a stronger work ethic? Or, within the Midwest and Rust Belt, how about workers in Milwaukee, Cleveland, or Pittsburgh?

This is part of a bigger narrative about Chicago. it is part of its character. Even as it is a global city with an important finance sector and many professional and white-collar workers, it imagines itself as a blue-collar city relying on manufacturing. The loss of manufacturing jobs in the last sixty years hit Chicago hard, as it did many cities, yet the narrative continues.

I would be interested in a more recent study that looks at how residents of the Chicago area think about the purported work ethic. Does the narrative hold across locations, groups, and occupations? Does the idea of “the city that works” extend throughout the region and different kinds of workers?

The legislative act that helped Disney build Disney World in Florida

Corporations, sports teams, and developers ask for or make use of tax breaks or monies or land opportunities provided by governments. Walt Disney benefited from a 1967 act by the Florida legislature:

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The Reedy Creek Development Act can be traced back to 1967.

It was a pivotal negotiating factor in convincing Disney to locate his company in Florida and allows the company to do just about whatever it wants on its land.

“The ability, the power to build a nuclear power plant, an airport manufacturer, distill and distribute alcoholic beverages and lots of other things,” said Dr. Richard Foglesong, author of “Married to the Mouse” in an interview with WFTV in 2021.

Many would love to have this kind of freedom to do what they want with a large property. In contrast to what was possible through this act, many property owners would have to apply to local governments for uses of the property beyond what is allowed through the local zoning.

If leaders in Florida follow through with revoking this act and Disney wants to go elsewhere, does this shape up to be a second Amazon HQ #2 situation? Or, does Disney have a lot fewer possible locations to go to given its need for a lot of land and good weather?